Stifel Starts Universal Forest Products (UFPI) at Hold

Stifel analyst Andrew Carter initiates coverage on Universal Forest Products (NASDAQ: UFPI) with a Hold rating and a price target of $95.00.

The analyst comments "We are initiating on UFPI with a Hold rating and $95 target price, which we derive by assigning a 6X EV/FY27E EBITDA multiple– a valuation at the low end of building products peers. Our neutral approach recognizes the uncertainty in end market volumes and lingering competitive issues in UFPI’s most profitable business Site Built Construction despite our positive long-term outlook. We believe UFPI’s advantages support +HSD unit growth from market share gains with end markets generally tracking GDP. UFPI’s manufacturing network breadth and scale enables the company to profitability serve the home centers, independent retailers, home builders, OEMS, and other customers while optimizing fiber utilization as the largest purchaser of North American softwood lumber. We believe UFPI offers a compelling case to establish Deckorators as a viable third option in the composite decking/railing category with the supply chain to bypass necessary two-step distribution to build brand awareness and strength. Deckorators lacks the mass to enable growth amid the malaise; however, consistent strength would enhance appreciation for the UFPI innovation agenda, in our view. We believe a patient approach to UFPI is appropriate given uncertain end market. But we estimate an improving net cash position while executing a planned five-year $1 billion capital investment creates increasing optionality for additional share repurchase or M&A to accelerate capital plans. Our estimates do not include a swifter realization of margin objectives and without a revenue inflection would likely drive meaningful upside for the shares."

For an analyst ratings summary and ratings history on Universal Forest Products click here. For more ratings news on Universal Forest Products click here.

Shares of Universal Forest Products closed at $90.43 yesterday.

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